Since late April, Nvidia (NVDA) has been on an eye-watering run. The stock price has surged at a pace that feels closer to a rocket launch than a normal market move. Naturally, investors are asking the same question over and over:
Is NVDA overvalued?
If you already own the stock, you might be wondering whether to ride the wave or take some profits.
If you don’t, the doubt is different: Have I missed my chance — or is there still room to grow?
Let’s walk through Nvidia’s valuation step by step, in plain English, and see what the fundamentals actually say.Let’s break down what’s driving the hype, what the numbers say, and whether the momentum has real staying power.to get in.
Is Nvidia Overvalued? Start With Valuation Ratios
Valuation ratios sound intimidating, but the idea is simple:
they tell you how much you’re paying today for the company’s sales and profits.
Price-to-Sales: High, but not extreme
One commonly used metric is the Price-to-Sales (P/S) ratio, which shows how much investors pay for every dollar of revenue.
✔️ Nvidia’s current P/S ratio is about 30x
✔️ In mid-2023, it peaked near 45x
So while NVDA is expensive compared to most companies, it’s not as stretched as it was during the height of AI euphoria.
On its own, that doesn’t tell the full story. To judge valuation fairly, we also need to look at growth and profitability.
Does Nvidia’s Growth Support Its Valuation?
Forward P/E: Looks scary at first glance. Nvidia’s forward P/E ratio (price compared to next year’s earnings) is around 40×.
For beginners, that sounds huge — and many conclude immediately that NVDA must be overvalued.
But here’s the key rule of fundamental analysis: High growth companies deserve higher valuation multiples.
So let’s look at Nvidia’s growth.
Nvidia’s Revenue Growth: Still Exceptional
Nvidia’s rise is powered by explosive demand for:
✔️AI chips
✔️ Data centers
✔️ Accelerated computing
Even though growth has cooled from triple-digit rates, it’s still enormous. Most recent quarterly revenue growth: ~69% year over year
For a company of Nvidia’s size, that’s extraordinary — and far above what most large-cap tech firms can deliver.
Earnings Growth: Best in Large-Cap Tech
Nvidia isn’t just growing sales. It’s growing profits even faster. Current projections suggest:
Net income rising from ~$30B in FY2025 to $45–50B by FY2027. That’s a 20–25% annual growth rate. Short term, the numbers are even more striking:
✔️~90% earnings growth in FY2025
✔️ 30–35% in FY2026
Among mega-cap tech companies, Nvidia sits at the very top of the growth leaderboard.
Profitability: Where Nvidia Truly Stands Out
Nvidia’s business model is incredibly efficient. It designs chips but doesn’t manufacture them. Capital costs stay low. High-end AI chips command premium prices. As a result, EBITDA margins exceed 60%, up from roughly 20% in 2023. That kind of margin expansion is rare — even in tech.
Mind-Blowing Capital Efficiency
One metric really shows how unusual Nvidia is: Return on Assets (ROA). Nvidia’s ROA rose from ~10% in 2023 to a projected 100%+ by 2027
That means Nvidia may generate more profit than the total value of its asset base — something almost unheard of in large-scale manufacturing industries.
For comparison:
Applied Materials: ~22% ROA
Meta and Alphabet: ~27% ROA
This level of efficiency explains why investors are willing to pay a premium.
Putting it all into context
Yes, Nvidia’s current forward P/E is ~40×. But markets price companies based on future earnings, not past ones. Using expected 2027 profits, Nvidia’s P/E drops to ~28.5.
For a company growing earnings at 20–30% per year, that multiple looks reasonable, not excessive.
There’s another important detail:
Nvidia has beaten analyst earnings estimates in 9 of the last 10 quarters. If that pattern continues, today’s valuation may even prove conservative.
The PEG Ratio: A Simple Reality Check
A favorite tool for beginners is the PEG ratio (Price/Earnings divided by Growth).
PEG ≈ 1 → fairly valued
PEG < 1 → growth may not be fully priced in
Nvidia’s PEG ratio based on 2027 earnings is about 0.8.
That suggests NVDA is not overvalued relative to its growth — and may even be undervalued on a growth-adjusted basis.
Verdict: Is NVDA Overvalued?
Based on fundamentals alone:
✔️Strong and sustained revenue growth
✔️ Exceptional profit expansion
✔️ Industry-leading efficiency
✔️ PEG ratio below 1
The data does not support the idea that Nvidia is overvalued.
At a projected 2027 P/E of ~28.5×, NVDA looks fairly priced — even attractive — for a company shaping the future of AI computing.
Where Could Nvidia’s Stock Go Next?
If Nvidia continues to meet (or beat) earnings expectations: A move toward $200 isn’t unrealistic. But investors should still watch three key risks:
Will economies of scale continue to improve margins? Will big tech maintain massive AI spending?
What could go wrong?
Skeptics often point to the semiconductor industry’s boom-and-bust cycles. This time, the story is different:
AI and data centers represent structural demand, not a fad
Nvidia is diversified across AI, data centers, gaming, automotive, and more
That doesn’t eliminate risk — but it does make Nvidia’s growth far more resilient than in past cycles.
FAQ: Is Nvidia Overvalued?
1. Is Nvidia overvalued compared to its history?
Nvidia trades above historical averages, but its growth and profitability are also far stronger than in the past. On a PEG basis, valuation looks reasonable.
2. Why do some investors still think NVDA is overvalued?
Mainly because the stock has risen so fast. Rapid price gains often trigger fears of a bubble — even when fundamentals remain strong.
3. Is Nvidia still a good buy at these levels?
If earnings growth continues and AI adoption expands as expected, Nvidia still looks attractive. Long-term investors should focus on fundamentals, not short-term price swings.
Important notice:
This article is not to be understood as a recommendation to buy or sell. Please conduct your own research before making investment decisions. To this end, we aim to provide you with the best portfolio management tool and investment research data possible. However, we cannot guarantee the accuracy of this information in spite of our extensive efforts to ensure that the data is complete and 100% accurate.